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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
CRIMINAL APPLICATION NO. 898 OF 2009
Ramkrishna Urban Co-operative Credit .. Applicant
Society Ltd., Maliwada, Ahmednagar,
through Authorised Signatory,
Shri Chhagan Tukaram Raut,
Age. 36 years, Occ. Service,
R/o. Mutha Chambers, Maliwada,
Ahmednagar.
Versus
Shri Rajendra Bhagchand Warma .. Respondent
Age 38 years, Occ. Business,
R/o. 2044, Daware Galli,
Near Vithal Mandir, Ahmednagar.
Shri L.B. Pallod, Advocate for the applicant.
Shri J.M. Murkute, Advocate for sole respondent.
CORAM : P.R. BORKAR,J.
RESERVED ON : 03.02.2010
PRONOUNCED ON : 16.02.2010
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J U D G M E N T :-
1. This is an application for leave to file appeal
against the order of acquittal passed by the learned Judicial
Magistrate, First Class, Court No.1, Ahmednagar in S.T.C. No.
960 of 2008, decided on 21.01.2009, whereby the respondent is
acquitted of offence punishable under section 138 of the
Negotiable Instruments Act.
2. Brief facts giving rise to this application may be
stated as below:-
. Present applicant has filed private complaint
alleging that the complainant is a co-operative society
registered under the Maharashtra Co-operative Societies Act,
1960. It is doing banking business. The respondent for his
business had taken loan of Rs. 2,00,000/- (Rupees Two Lakhs
Only) on 18.10.2000 and for satisfaction of the loan, he
executed promissory note, mortgage deed, guarantee deed etc.
The respondent has agreed to repay amount from time to time
by installments. Accordingly, cheque No. 500276 of Rs.
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87,209/- drawn on Ahmednagar Merchants Co-operative Bank
Ltd., Branch – Dalmandai, Ahmednagar, was issued. The cheque
was dated 24.01.2008. When the complainant/applicant
presented the cheque, it was dishonoured on the ground of
insufficiency of funds. Thereafter, on 11.02.2008 a notice
was issued by the complainant/applicant, but inspite of the
same, the amount was not paid by the respondent and therefore
the complaint was filed.
3. The learned Magistrate after considering the
evidence led by both sides, passed the order of acquittal
acquitting the respondent of offence punishable under section
138 of the Negotiable Instruments Act, mainly on three
grounds. Firstly, it is held that as many as ten blank
cheques were obtained by the applicant bank while
sanctioning/disbursing loan as security and one of them was
used in the present case; secondly, there is bar of
limitation; and thirdly, amounts paid by the respondent, in
respect of which he has produced receipts in defence, were
not reflected in the extract of account produced on record
and as such it is not proved that the amount of Rs. 89,209/-
was due on the date of the cheque. As against said decision
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of acquittal, the applicant/complainant wishes to file the
appeal and therefore he filed this application under section
378 (4) of the Code of Criminal Procedure for leave to file
appeal.
4. Heard Adv. Shri L.B. Pallod for the applicant and
Adv. Shri J.M. Murkute for the respondent.
5.
The Trial Court in para 12 onwards has considered
the evidence on record. The respondent/accused in his
affidavit in lieu of examination-in-chief has stated that he
had repaid the entire loan in the year 2005 and he possessed
receipts thereof. He also stated that while granting loan,
ten blank cheques signed by him were obtained. No cheque was
issued by him of amount due towards loan. It is observed
that in the cross-examination said evidence has remained
unshaken and the suggestions put on behalf of the complainant
were denied. The Court also came to a conclusion in para 13
that the evidence of the accused/respondent was reliable. It
is proved that he had given 10 blank signed cheques to the
complainant. In order to substantiate this, he has examined
P.W.3-Ashok Jindam, who was officer of the Ahmednagar
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Merchants Co-operative Bank. Said witness has stated that
cheque book containing cheque No. 500276 was given to the
accused/respondent on 04.10.2000. He proved document Exh.46.
He also produced account extract at Exh.47. This evidence
was also unshaken in cross-examination. The witness was
found reliable witness by the Trial Court. The document at
Exh.46 shows that the cheque book bearing cheque in question
was issued to the respondent/accused on 04.10.2000. It was
cheque book contained cheque Nos. 500276 to 500300.
Thereafter on 13.11.2001 another cheque book was issued. On
22.02.2005 third cheque book was issued to the respondent.
The account extract at Exh.47 clearly shows that the cheques
bearing Nos. 500288 to 500299 were used till 24.09.2001 and
thereafter cheques issued in the second cheque book bearing
cheque Nos. 783491 and 783498 were used till 28.02.2005.
Thereafter, cheques from third cheque book bearing Nos.
823492 to 823500 were used till 07.03.2008. So, it was
observed by the learned Magistrate that all this clearly
indicated that the accused/respondent was not using cheques
in the year 2008 from the cheque book in which cheque No.
500276 was included. So, all these circumstances supported
the case of the respondent that the respondent had issued 10
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blank cheques signed by him to the complainant in the year
2000 while sanctioning the loan.
6. The learned advocate Shri Pallod argued that even
accepting that this to be so, still it will not affect the
case of the complainant. He relied upon the case of
Purushottam Maniklal Gandhi V/s. Manohar K. Deshmukh, 2007
(2) Bom.C.R. (Cri) 38. In that case Single Bench of this
Court has observed in para 18 that it is open to a person to
sign and deliver a blank or incomplete cheque and it is
equally open for the holder to fill up blanks and specify the
amount therein. This does not amount to any alteration in
the cheque, since the cheque was not initially issued for any
different specified sum which was changed. In para 19 of the
said case it is observed that when a drawer of a cheque
delivers a signed cheque, he obviously gives an authority to
the holder to put a date of his choice. So, it is argued
that merely because blank cheques were given by the
respondent to the complainant, that does not mean that said
cheques are not valid. Moreover, so far as limitation is
concerned, in the same case it is observed that limitation
would start from the date which is (put) on the cheque. The
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learned advocate also referred to para 22 of the said case
and argued that even for the time barred debt when there is
fresh promise to pay, it would be legally enforceable debt.
7. Another case cited is the case of Single Bench of
this Court in Balagi Agencies Pvt. Ltd, V/s. Vilas Bagi of
Bagi Packers Ltd., and Anr., 2008 ALL MR (CRI) 2230. Therein
the drawer of cheque delivered a signed cheque. It is held
that thereby he gave authority to the holder to put a date of
his choice. As per Section 20 of the Negotiable Instruments
Act, the holder had authority to fill in the date and
limitation had to be reckoned from that date and therefore it
cannot be said that the instrument had become time barred
being presented beyond the period of six months from the date
when it was given. However, in both these cases of
Purushottam and Balagi Agencies Pvt. Ltd., amounts had become
due before cheques were issued. So, there was existing
liability to pay when the cheques were issued.
8. Section 138 of the Negotiable Instruments Act is as
follows:-
“138. Dishonour of cheque for
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insufficiency, etc., of funds in the account. –
Where any cheque drawn by a person on an account
maintained by him with a banker for payment of any
amount of money to another person from out of that
account for the discharge, in whole or in part, of
any debt or other liability, is returned by the
bank unpaid, either because of the amount of money
standing to the credit of that account is
insufficient to honour the cheque or that it
exceeds the amount arranged to be paid from that
account by an agreement made with that bank, such
person shall be deemed to have committed an offence
and shall, without prejudice to any other provision
of this Act, be punished with imprisonment for a
term which may be extended to two years, or with
fine which may extend to twice the amount of the
cheque, or with both :
Provided that nothing contained in this
section shall apply unless –
(a) the cheque has been presented to the bank
within a period of six months from the date on
which it is drawn or within the period of its
validity, whichever is earlier;
(b) the payee or the holder in due course of
the cheque, as the case may be, makes a demand for
the payment of the said amount of money by giving a
notice in writing, to the drawer of the cheque,
within thirty days of the receipt of information by
him from the bank regarding the return of the
cheque as unpaid; and
(c) the drawer of such cheque fails to make
the payment of the said amount of money to the
payee or as the case may be, to the holder in due
course of the cheque within fifteen days of the
receipt of the said notice.
Explanation – For the purposes of this
section, ‘debt or other liability’ means a legally
enforceable debt or other liability.”
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9. It is argued that the cheque drawn must be for the
discharge, in whole or in part, of any debt or other
liability. So the debt or other liability must be in
existence when the cheque, whether blank or post dated was
issued. In this case the accused-respondent issued the
cheque in question as security for loan before loan amount
was disbursed. So, cheque was not towards any existing debt
or liability. In case of loan transaction, borrower is in
need of money and therefore he borrows loan amount from some
one with understanding that the loan amount would be repaid
in lumpsum on a future date or in installments from
particular future date onwards periodically, with or without
interest. It is not transaction of loan, if the amount is to
be repaid the moment it is paid to borrower. So, provisions
of Section 138 of the Negotiable Instruments Act are not
attracted.
10. We may consider object and purpose for introducing
amendment to the Negotiable Instruments Act, 1981 by
Amendment Act, 1988, as stated in the Amendment Act and
various authorities to facilitate correct interpretation of
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the provisions. The object and reasons clause of the bill
which introduced the Amending Act of 1988 would show that the
new Chapter XVII was incorporated specifically to “enhance
the acceptability of cheques in settlement of liabilities by
making the drawer liable for penalties in case of bouncing of
cheques due to insufficiency of funds in the accounts or for
the reason that it exceeds the arrangements made by the
drawer, with adequate safeguards to prevent harassment of
honest drawers.
11. In Vinod Shivappa V/s. Nanda Beledappa, AIR 2008
S.C.2279, it is observed that Section 138 of the Act was
enacted to punish those unscrupulous persons who purported to
discharge their liability by issuing cheques without really
intending to do so, which was demonstrated by the fact that
there was no sufficient balance in the account to discharge
the liability. With a view to avoid unnecessary prosecution
of an honest drawer of a cheque, or to give an opportunity to
the drawer to make amends, the proviso to S. 138 provides
that after dishonour of the cheque, the payee or the holder
of the cheque in due course must give a written notice to the
drawer to make good the payment. Cl. (c) of proviso to S.
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138 provides that the section shall not apply unless the
drawer of the cheque fails to make the payment within 15 days
of the receipt of the said notice. The proviso is meant to
protect honest drawers whose cheques may have been
dishonoured for the fault of others, or who may have
genuinely wanted to fulfil their promise but on account of
inadvertence or negligence failed to make necessary
arrangements for the payment of the cheque. The law treats
such lapses induced by inadvertence or negligence to be
pardonable, provided the drawer after notice makes amends and
pays the amount within the prescribed period.
12. It is observed in Mosaraf Hossain Khan V/s.
Bhagheeratha Engg. Ltd., AIR 2006 SC 128 : (2006) 3 SCC 658 :
2006 Cr.L.J.1683 that the object of the provision of S. 138
of the Negotiable Instruments Act is that for proper and
smooth functioning of business transaction in particular, use
of cheques as negotiable instruments would primarily depend
upon the integrity and honesty of the parties. It was
noticed that cheques used to be issued as a device inter alia
for defrauding the creditors and stalling the payments.
Dishonour of cheque by the bank causes incalculable loss,
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injury and inconvenience to the payee and the entire
credibility of the business transactions within and outside
the country suffers a serious set back. Remedy available in
a Civil Court is a long drawn process and an unscrupulous
drawer normally takes various pleas to defeat the genuine
claim of the payee.
13.
In Electronics Trade & Technology Development
Corpn. Ltd. V/s. Indian Technologists & Engineers
(Electronics) (P) Ltd., (1996) 2 SCC 739 it is observed that
if we consider the provisions of Sections 138 to 147 and
their object, it is clear that object of section 138 is to
inculcate faith in the efficacy of banking operations and
credibility in transacting business on negotiable
instruments. Despite civil remedy, section 138 intended to
prevent dishonesty on the part of drawer of negotiable
instrument to draw cheque without sufficient funds in his
account maintained by him in a bank and induce the payee or
holder in due course to act upon it. Same view is taken in
the case of Goa Plast (P) Ltd. V/s. Chico Ursula D’Souza
(2003) 3 SCC 232.
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14. Thus the object of the amendment and introduction
of Chapter XVII in the Negotiable Instruments Act by Act of
1988 was mainly to encourage all major transactions including
commercial or business transactions through cheques and to
enforce credibility and acceptability of cheques in
settlement of liability in general. Encouragement of payment
by cheques/credit cards/debit cards rather than by cash is
necessary for healthy economy. That also brings in
transparency in transactions and discourages creation of
black or unaccounted money through evasion of taxes or other
malpractices. So, provisions like Section 138 of Negotiable
Instruments Act are salutary to give reliability, credibility
and acceptability of negotiable instruments like cheques in
daily life. However, the object was not to provide effective
and speedy remedy for recovery of loans. Law makers must not
have intended or imagined that money lenders or banks would
obtain blank or post dated cheques while
sanctioning/disbursing loans as securities and would use them
to make debtors/borrowers to repay loan under threat of
prosecution and punishment under Section 138 of the
Negotiable Instruments Act. So, it is doubtful if provisions
of Section 138 of the Negotiable Instruments Act would be
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attracted to a case in which a blank or post dated cheque is
obtained by a bank or money lender before or while
sanctioning or disbursing loan amount as security for the
loan.
15. In following cases bouncing of cheques which were
given as security for loan amounts were held not to attract
provisions of Section 138 of the Negotiable Instruments
Act :-
1) Anand Urban Co-operative Credit Society V/s.
Vipin Lalchand Mehta & Anr., 2008 (2) Bom.C.R.
(Cri.) 65 : 2008 ALL M.R. (Cri) 2266.
2) Goa Handicrafts, Rural & Small Scale Industries
Development Corporation Ltd., V/s. Samudra
Ropes Pvt. Ltd. & Anr., 2005 ALL MR (Cri)2643 : 2006 (1) Bom.C.R. (Cri) 157.
3) Hanumant R. Naik V/s. Ajit Harmalkar, 2008 (1)
Bom.C.R. (Cri) 432 : 2008 ALL MR (Cri) 486.
4) M.S. Narayana Menon Alias Mani V/s. State of
Kerala and Anr., (2006) 6 S.C.C.39.
5) Karekar Finance Pvt. Ltd., V/s. Shri M.N.
Bashyam & Anr., 2007 ALL MR (Cri) 3073 : 2008
(3) B.C. 98.
6) Jayantilal Parmar V/s. Vaishali Farne (2007)
2 Bom.C.R. (Cri) 403.
7) Om Shri Finance & Investment Corporation V/s.
Mohemmed Sheikh (2007) 11 LJSOFT (URC) 24.
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16. In Anand Urban Co-operative Credit Society V/s.
Vipin Mehta, 2008 (2) Bom.C.R. (Cri) 65, trial court held
that 5 blank cheques were obtained towards security for
repayment of loan as in this case. This Court refused to
interfere with the order of acquittal.
17. In Karekar Finance Pvt. Ltd. V/s. Shri M.N. Bashyam
& Anr., 2007 ALL MR (Cri) 3073, it is held that though the
accused had taken loan from the complainant, he proved that
the blank cheque was issued by him towards collateral
security for loan and interest. It is held that the cheque
cannot be said to be issued towards discharge of a debt and
same would not come under purview of Section 138 of the
Negotiable Instruments Act.
18. Similarly, in the case of Jayantilal Parmar V/s.
Vaishali Farne (2007) 2 Bom.C.R. (Cri) 403, three blank
cheques were given as security for loan amount. Two cheques
were encashed and third was bounced. The Single Bench of
this Court refused to interfere with the order of acquittal.
Facts of said case are similar to the facts in case before
us.
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19. The facts involved in Om Shri Finance & Investment
Corporation V/s. Mohemmed Sheikh (2007) 11 LJSOFT (URC) 24,
are also similar to facts of our case. The Court declined to
interfere with the order of acquittal.
20. The Trial Court considered that though cheque was
issued on or before 18.10.2000, the date put thereon is
24.01.2008. No doubt there is authority to put date so also
the amount, as it was a blank cheque. But the question
raised is whether provisions under Section 138 of the
Negotiable Instruments Act should be made applicable to a
blank cheque issued as security for loan after period of 7 to
8 years.
21. In the present case blank cheques were issued prior
to disbursement of loan as a collateral security for loan
which was sanctioned. In such case there was no existing
debt or liability when the cheque is issued. So, in the
facts and circumstances of the case, the case does not fall
within four corners of offence punishable under section 138
of the Negotiable Instruments Act. Of course such defence is
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available against payee and not holder in due course.
22. In this case, we cannot say that debt was time
barred on the date appearing on cheque i.e. 24.01.2008 in
view of various payments allegedly made by the respondent
which renewed period of limitation under Section 19 of the
Limitation Act from time to time. To that extent I differ
from the Trial Court.
23. Lastly the Trial Court has observed that the
respondent-accused in his evidence on record has produced
receipts issued by the complainant bank at Exh. 61 to 75. It
is case of the respondent/accused that he had repaid entire
loan in the year 2005. In para 17 it is observed that the
account extract produced by complainant bank at Exh.25 was
produced up to 12.12.2003. Inspite of sufficient opportunity,
the accounts extract of subsequent period up to the date of
cheque (which was 24.01.2008) was not produced. Obviously
the payment made after 12.12.2003 did not appear in the
account extract produced. In these circumstances, the Court
held that it is not proved that on the date appearing on the
cheque or the the date on which the cheque was presented,
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amount of Rs. 87,200/- was outstanding. There was omission
to prove said fact inspite of record being available with the
complainant and therefore adverse inference was drawn. It is
held that it is not proved that on the date of cheque amount
of Rs. 87,209/- was outstanding and therefore provisions of
section 138 of the Negotiable Instruments Act are not
attracted. We cannot find fault with this ground for
acquittal.
24. Here I may rely on Pawan Enterprises V/s. Satish H.
Verma, 2003 Bom.C.R. (Cri). 474, In that case a colour T.V.
was purchased on 4th April, 1998 by the respondent from the
applicant for total consideration of Rs. 22,760/-. Rs.
5000/- were paid in cash and post dated cheque of Rs.
17,745/- was issued on 08.01.1998. The respondent was
supposed to pay balance amount in installment or in
accordance with post dated cheque. When the cheque was
presented on 19.01.1998 what was due was only Rs. 10,975/-,
though on 08.01.1998, the date of issuing post dated cheque
for Rs. 17,745/- was due. It was held that the cheque issued
was for much higher amount than was actually due and
therefore it cannot be said that the cheque was issued
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towards debt or other liability within the meaning of Section
139, and offence under section 138 of the Negotiable
Instruments Act is not committed. In said case the Court
distinguished between ‘liability’ and ‘security’ and observed
that both cannot be mixed or acted upon simultaneously. In
para 6 it is observed that if the act of a person in
discharge of liability is not done, then security comes in
picture and if the act in discharge of a liability is
performed then security would not have any legal force.
25. After having considered all aspects, in my opinion,
this is not a case where leave to file appeal against order
of acquittal can be granted. Hence, the Criminal Application
is dismissed.
[P.R. BORKAR,J.]
snk/2010/FEB10/cra898.09
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